Gold Market Report – May 13, 2024

To keep Hard Assets Alliance customers up to date on everything influencing the precious metals markets, we're sharing this daily report that details price movements and technical and macro trends. We use it internally to keep our teams up to date.

After surging from $2304 to a 3wk high at $2360 (resistance at down trendline from 4/12 $2432 ATH held) in its last 2 sessions, gold pulled back overnight. The yellow metal retreated in a range of $2365 - $2339, and fell below Fridays $2345 low. Golds decline was buffered by a modest decline in the US dollar, as the DX slipped from 105.35 105.13. Though the dollar was a tad firmer against the yen:

• (155.68 155.96)
• Continued expectations of US-Japan interest rate differentials remaining wide

And firmer against the yuan: (7.2268 7.2358), as a firmer Chinese Inflation YoY (0.3% vs exp 0.1%, 0.1% last) was overshadowed by:

• Weaker PPI (-2.5% vs exp -2.3%, -2.8% last)
• Weaker Vehicle Sales (9.3% vs 9.9% last)
• New Yuan Loans lower (730B yuan vs exp 1200B, 3090B last)

The greenback softened vs the euro ($1.0766 - $1.0798):

• Traders pricing in earlier and deeper ECB rate cuts vs the on hold Fed, with expectations for US CPI this Wed only showing a modest improvement (CPI MoM exp 0.4% vs 0.4% last, Core CPI MoM exp 0.3% vs exp 0.4%)

US bond yields were lower and also gold supportive with the US 2yr from 4.868% - 4.844%, and the US 10yr from 4.503% - 4.479%. Equities were slightly firmer and a modest headwind for gold, however, with S&P futures up 14 to 5260. The advance was led by GameStop (posting by Keith Gill, aka Roaring Kitty, ignites short squeeze), Nvidia (upgrade by Jefferies), and Arm (expects to launch AI chips next yr).

Markets digested a worse than expected reading on US Consumer Inflation Expectations (3.3% vs 3% last) along with moderately hawkish comments from the Feds Phillip Jefferson:

• Economy has made a lot of progress
• The labor market has been very resilient
• I view the economy as in a solid position
• The decline in inflation has attenuated
• Inflation is a source of concern
• Is focused even more so on inflation given broader strength
• It is appropriate that we maintain the policy rate in restrictive territory
• It is appropriate to keep the policy rate restrictive until clear inflation ebbing.

This prompted bond yields to rebound , with the US 2yr to 4.855% and the US 10yr to 4.488%. Stocks slumped and turned negative, with the S&P off 5 to 5218. The decline was led by Communication Services and Health Care. The DX, after a further softening to 105.06 just before and through the NY open, rebounded to 105.24. Gold, which had an early bounce to $2350 off of the further softening in the DX, slipped back through its overnight low at $2339 to reach $2332.

Support:

$2304-10 (5/7, 5/8, 5/9 lows), $2300 (options), $2292 (5/6 low), $2278-86 (4/30, 5/1, 5/2, 5/3 lows), $2258-67(4/3, 4/5 lows, down trendline from 4/10 $2320 low), $2247-50 (4/2 low, options), $2208 (50% retracement of up move from 2/14 $1984 low to 4/12 $2432 ATH), $2229 (4/1 low), $2187 (3/28 low), $2174-75 (3/27 low, options, $2157-68 (3/22, 3/25, 3/26 lows, $2146-50 (3/18, 3/19, 3/20 lows)

Resistance:

$2365 (5/13 high), $2373-79 (options, down trendline from 4/12 $2432 ATH), $2389 (4/22 high,), $2400 (options), $2418-25 (4/19 high, options), $2432 (4/12 ATH)

FedWatch:

Todays warmer Consumer Inflation Expectation reading echoed the University of Michigan Inflation Expectations from Friday, and tugged probabilities of the Fed cutting the Funds rate sooner and deeper slightly down. This was after last Thursdays weaker Jobless Claim that added to the slightly dovish tilt from the 5/3 Payroll Report along with Powells surprise dovish tilt on 5/1 that moved the probabilities of sooner and deeper FF rate cuts significantly. Markets are still predicting the first cut to occur in Sep (63% prob) and are continuing to expecting a 2^ndcut at the Dec meeting to reach a 4.75% Funds rate by year end.

FF Probabilities:

June:8.9% prob of cut to 5% or below

July:29.6% prob of cut to 5% or below

Sep:63.4% chance of cut to 5% or lower

Nov:33.1% chance of cut to 4.75% or lower

Dec:55.5% prob of cut to 4.75% or lower

Last Fridays CFTCs COT Report as of 5/7 showed the large funds cutting 6.7k contracts of longs and cutting 2.1k contracts of shorts to reduce the Net Fund Long Position by 4.6k contracts to 199.5k contracts. This was done on golds advance from $2285 - $2315 during 4/30-5/7, showing a good amount of profit taking along with short covering during the rally. At around 200k contracts, this position remains significantly large, and will be a significant bearish factor going forward.

GLD holdings:

After reaching 883 tonnes on 11/17/23, holdings became surprisingly steady / lower, sliding to just 815 tonnes on 3/12 its lowest level since July 2019. This is despite golds $200+ move ($1980 - $2080) during that period. Though gold has rallied another $350+ since then, GLD holdings have only increased by around 15 tonnes to 825-33 tonnes (832 tonnes last). This continues to reflect a fair amount of profit taking from GLD longs into the rally, along with some diversification of AI assets into bitcoin ETFs (Bitcoin remains strong, trading either side of $65k).This level for GLD holdings remains toward the lower end of the 730 tonne low in mid-2018, and 1350 tonne high from 12/2012, and can be viewed as a modest bullish factor going fwd.

Q1 Earnings Season winding down so far it has been decent: with around 92% of S&P reporting, roughly 80% reporting EPS > estimates

Tues:Japans PPI, Machine Tool Orders, German Inflation, ZEW Economic Sentiment, Eurozone ZEW, UK Employment, US NFIB Business Optimism, PPI, Redbook Sales, Powell Speech, API Oil Inv

Wed:Chinas 1yr MLF Announcement, Eurozone GDP, Ind Prod, Employment Change, CPI, Retail Sales, Business Inv, EIA Oil Inv, Net LT TIC Flows

Thurs:Japans GDP, Ind Prod, Cap Util, ECB Fin Stability Review, BOE Fin Stability Review, US Housing Starts, Building Permits, Jobless Claims, Philly Fed, Ind Prod, Cap Util

Fri:Chinas House Px Index, Fixed Asset Inv, Ind Prod, Retail Sales, Unemployment, Eurozone Inflation, US Leading Index, COT

We hope you found this report informative and useful in understanding current market conditions. To check your holdings, activate auto-investment via MetalStream, or to start a new investment in physical gold or silver, log in to your account today.

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